Verizon Oath CEO Armstrong To Reportedly Step Away From Ailing Ad Business

A shakeup in Verizon's ad division reportedly finds Oath CEO Tim Armstrong in talks to depart as advertising sales at the company continue to fall.

Verizon paid $4.4 billion for AOL in 2015, and about $4.5 billion for Yahoo in 2017, with the intention of building an advertising powerhouse supported by mobile subscriber data. The two companies, AOL and Yahoo, helped Verizon build an advertising division called Oath in which Armstrong, the former CEO of AOL, leads -- but the rest has not panned out as expected.

Oath is expected to lose worldwide online advertising market share to Google, Microsoft, Facebook and others, according to eMarketer. In 2018, Oath is expected to take 1.7% market share, down from 2.0% in 2017. That percentage will dip to 1.5% in 2019 and 1.4% in 2020, per the research company. 

Some marketers say the ad division has become increasingly difficult to work with. Others say they get less than expected from an advertising business tied to a major telecom mobile company.

Jonathan Kagan, senior director of search at Cogniscient Media, said the agency moved away from Oath's Yahoo search, as the manpower investment to manage and run it greatly exceeded the return on investment in terms of traffic volume.

“Not to mention we get some coverage in Yahoo when the other search engines feed its search engine results pages,” Kagan said.

While an Oath spokesperson said "we don't comment on speculation and have no announcements to make," The Wall Street Journal reports there were recent internal discussions to spin off the Oath ad business. Verizon, instead, decided to integrate some of its operations more closely with the rest of the company.

“There is no intention of spinning out Oath in any particular format,” said Lowell McAdam, Verizon chairman and chief executive officer, during the company's second-quarter 2018 earnings call. “We see the synergies that we expected to see and we see the future that we had hoped for.”

Verizon reported Oath's revenue at $1.9 billion, which was relatively flat compared with the prior quarter.

Sources tell the WSJ the changes have Armstrong in discussions to depart as soon as next month.

Some of the agreements apparently have not come to fruition. Originally, Verizon agreed to share anonymous subscriber data with Oath, but WSJ sources say the carrier refused to share information about the apps customers use and their web-browsing activity unless they give permission. Of those, only 10 million of Verizon’s approximate 116 million subscribers have opted in to the “Verizon Selects” program that offers promotions in exchange for the data.

There also has been talk that Armstrong has been handing off his daily duties to K. Guru Gowrappan, a former executive at Alibaba Group Holding who joined the unit in spring 2018.

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